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Initial Exchange Offerings Are Providing Big Returns, But Why?

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Christopher Brookins is the founder of Valiendero Digital Assets, a quantitative crypto fund founded out of Carnegie Mellon.


2019 has not only seen a resurgence of the crypto bull, but also capital raising.

In particular, IEOs or “initial exchange offerings” have been highly visible for both good and bad reasons. Positively, IEOs have produced large returns to-date. Negatively, to quote Jeff Dorman at Arca, “Many argue (correctly) that IEOs are illegal (in the US) since the tokens are clearly securities, & unregulated exchanges are acting as broker/dealers. Thus, U.S. investors can’t participate.”

However, despite legality issues for US investors, many global participants are still actively investing in these offerings due to their return potential.

So, what is driving prices?

Driving Forces

New and small-cap (less than $100 million in market cap) digital assets are highly reflexive and driven by two key variables, exchange volume (ExVol) and market cap (MCAP). The logic being that the greater the buying volume in relation to the asset’s overall market cap, the greater the potency of its reflexivity cycle (see below).

The aforementioned speculative demand can be quantified by the ratio of ExVol to MCAP, which may offer investors a better tool to gauge risk and reward in these speculative assets.

Quantitative Analysis

The chart below displays the correlation of the speculative demand ratio (ExVol to MCAP) in the price of several IEOs. The chart is broken down into distinct time periods, which shows the efficacy of the ratio as the asset matures, e.g. first 60 days, first 180 days, first 360 days, and historical (since inception).

Please note, reliable MCAP data for newer IEOs like MATIC, FET, and CELR does not span 60 days, thus only historical is calculated.

*blocktap.io, coinmetrics.io, and coinmarketcap.com

This time, the chart below displays the correlation of the speculative demand ratio (ExVol to MCAP) toin price of several small-cap assets as a way to generalize the ratio to all new issuances, not just IEOs in 2019.

*blocktap.io, coinmetrics.io, and coinmarketcap.com

Conclusion

As the aforementioned charts illustrate, the speculative demand ratio is a highly valuable signal for investors looking at IEOs or new digital assets, especially during the first 180 days of existence.

Post-180 days, the ratio is still useful for price prediction, but its signal diminishes. Presumably, as an asset matures, fundamentals influence price more, e.g. bitcoin’s historical correlation to in price is only 0.02.

However, for newer IEOs like MATIC, CELR, and FET, the correlation of the speculative demand ratio is likely to rise over the coming months. Thus, current or potential investors should closely monitor the ratio’s trend as a directional gauge of risk and reward.

For more information on IEOs, watch CoinDesk’s explainer video below:

Disclaimer: this article is for educational purposes only and should not be considered investment or trading advice.

The author holds bitcoin and ether at the time of writing.
source:.coindesk

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Reddit Investigation Reveals Scope of Manipulation within Online Crypto Communities

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A Reddit user by the name /CryptoMaximalist recently revealed the results of an investigation into manipulation within the online cryptocurrency community. The investigation looked into how a group of certain users has been hijacking threads in the r/CryptoCurrency and r/CryptoMarkets subreddits to promote and shill specific products and projects.

Manipulation, shilling, and self-promotion are no strangers to the cryptocurrency industry so many will not be surprised by the news, but the investigation gives some interesting insight into the scope of these activities and how they are conducted. Throughout the investigation, the user managed to uncover 50 Reddit accounts which he dubbed the “Dream Network”. These accounts appear to be working together to perform specific types of manipulation known as Astroturfing and Vote Manipulation.

Vote Manipulation is relatively self-explanatory, and Astroturfing is the act of making the promotion of a specific project look natural and organic – when in fact the users promoting the project are all involved in the scam. In order to make a project look legitimate, several users will begin long and detailed comment threats featuring questions, answers, and discussions that all appear to come from separate individuals with their own opinions. While they may appear to be separate accounts, often the questions and responses are all instigated by the same person in real life or have been agreed upon beforehand.

Several big projects implicated
Crypto projects that have been implicated in the manipulation include Ontology, Bitmax, Ultra Token, OOOBTC, MOAC, Contentos, and Dreamr, amongst others. While it is not conclusive that the operators of these projects elicited the manipulative behavior, it makes sense that those conducting the manipulation stand to make a profit from the success of the project.

To discover which accounts are likely involved in manipulation the investigation looked into the historical behavior of the accounts. Many were found to have long periods of inactivity followed by a sudden change in personality – indicating the account had likely been sold to a ‘shill‘. Shills will often buy existing accounts with high karma and a long history so that they appear more authentic. Other questionable behavior includes ‘karma farming’ – posting comments in popular threads like r/aww that typically accrue karma with very little effort.

As mentioned above, manipulation is not exactly a new concept in cryptocurrency, but hopefully, this investigation will help some newbies not lose money by investing in rubbish ‘pump n dump’ schemes.

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Blockstack’s SEC-Regulated Crypto Token Offering Successfully Raises $23 Million

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Blockstack, the first SEC-regulated token offering, successfully raises $23 million in two stages – the SEC regulated and the international offering including Asia’s strategic rounds.

The first US Securities exchange commission (SEC) regulated token offering, Blockstack, completed yesterday successfully raising $23 million USD in the process. The official announcement by the CEO and co-founder of Blockstack, Muneeb Ali, further confirmed the company is looking for a further $5million+ from international investors. The international investors will be offered tokens in a private placement or an SEC-regulated token offering again.

The total stats for the Stacks (STX) token stands at 74 million tokens disbursed at a price between $0.12 and $0.30 USD in the past 60 days. The tokens were offered in two batches – the first one, the SEC approved token under Regulation A+ and the second, the international token offering under regulation S – raising $15.5 million and $7.5 million respectively.

The report reads,

“We want to thank the thousands of you that have participated. For the first time, retail investors in the United States were able to participate in a token offering qualified by the SEC. More than 4,500 individuals and entities participated in the 2019 token offerings.”

Some of the top investors in the token offering includes, Union Square Ventures, Lux Capital, Recruit Holdings, Arrington Capital, Hashkey Group, Fenbushi Capital, Frontier Ventures, Spartan Group, and other funds.

More On The SEC-Regulated Stacks (STX) Token

Earlier in June, BEG reported the SEC had given Blockstacks the go ahead to offer their tokens to the public under certain regulations. The regulations are less stringent than those of a regular IPO, requiring less disclosure of details. The fork to distribute the tokens will commence in the next 30 days and continue for a further 30 days if need be.

Once the token offering and release period is over (in the next 30 days or so) the company will start building and developing its Blockstack decentralized computing network. The announcement further confirmed US exchanges will not list the STX token and US traders will not be able to access trading of the token once it launches this October.

Source. bitcoinexchangeguide.

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Crypto Exchange OKEx to List Hedera Hashgraph’s Token HBAR

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Cryptocurrency exchange OKEx announced that it will soon list enterprise-focused decentralized network Hedera Hashgraph’s native token HBAR.

As OKEx’s spokesperson told Cointelegraph, the platform will add HBAR to its spot market with HBAR/BTC, HBAR/USDT and HBAR/USDK on Sept. 17. Deposits and withdrawals will open on Sept. 16 and Sept. 24 respectively. Head of Asia Pacific at Hedera Hashgraph Edgar Seah added: 

“Hbars play a crucial role in the function, growth, and security of the Hedera network, and it is important that they are available to those who wish to use or create applications on the network. OKEx’s focus on listing projects with practical uses cases is in line with our belief that making coins easily accessible to developers is important for the development of decentralized ledger platforms such as Hedera.”

Expanding support

As Cointelegraph reported recently, OKEx announced that the exchange will support Ethereum Classic’s (ETC) upcoming Atlantis hard fork that is planned to occur between Sept. 12 and Sept. 13 at block height 8,772,000.

On Aug. 30, it was reported that Boeing will join IBM on Hedera Hashgraph’s governing council, although the aircraft giant has not officially confirmed the news.

Source.cryptonewsz

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